Is a balanced-budget amendment a good trade for a debt-ceiling hike?

posted at 1:36 pm on April 20, 2011 by Ed Morrissey

On Sunday, Senator Rand Paul (R-KY) suggested that he might vote for an increase in the debt ceiling if it came attached to a balanced-budget amendment to the Constitution. The latter has been a goal of fiscal conservatives for some time, but in my latest column at The Week, it’s a trap in two key ways. Not only will it take years to pass, but the effect may be far from what conservatives intend — and in the end, it leaves us with the same problem:

But let’s assume that all the stars align for a balanced budget amendment, one that the states approve and that actually forces Congress to put spending in sync with revenue. What then? Our current deficits come not from discretionary spending, but entitlements. Non-mandatory spending in fiscal year 2011 was $1.3 trillion, which means that Congress could have redlined every last dime of defense, homeland security, and other discretionary spending — and we would still have a $300 billion deficit. That problem becomes worse each year, too, as entitlements expand while running on autopilot.

Passing a balanced budget amendment would still require entitlement reform, unless we choose to raise taxes instead. That’s the trap. Congress wants to say yes to its constituents, and that means spending money. Once a constitutional requirement to balance the budget gets imposed on Congress, they will have to choose between raising taxes and cutting services every year, while voters want neither to happen. If we hear nothing but class-warfare demagoguery now on budget issues, just wait until Congress can no longer kick cans down the road. Every budget will end up with new surtaxes on the “wealthy,” which will drive investors overseas, which will eat into revenues, and which will prompt more surtaxes on the wealthy.

If Paul wants a trade for his debt-ceiling vote, he should get something of real value for it — a change that will make an actual difference. We need entitlement reform to get to the root of the real driver of the deficit, and more discipline from Congress on discretionary spending so that they stop aggravating the problem. We can achieve those goals much more quickly than a balanced budget amendment to the Constitution, which doesn’t address the main problem, and might add a few more obstacles to fiscal reform instead.

Byron York warned yesterday that we’re going to find ourselves playing chicken again on the debt ceiling:

But here’s the problem for Republicans. They control the House of Representatives. The debt ceiling has to be raised — Boehner has always conceded that — and the party in power has to do it. Even as Boehner demands spending concessions as the price of raising the ceiling, the White House knows that in the end he will have to pass a bill. “Our bargaining power derives from our controlling the House but is also limited by it,” says a House GOP source.

In the Senate, on the other hand, minority Republicans will be free to oppose any debt ceiling bill that isn’t to their liking, because in the end it will be the Democrats’ responsibility to pass it. Protest-minded Republicans are heartened by Obama’s recent admission that his own vote against raising the debt ceiling in 2006 was “a political vote as opposed to doing what was important for the country.” …

The bottom line is, the debt ceiling issue won’t be settled before an extended game of chicken, one in which Republicans will undoubtedly win some concessions but will, in the end, have to give in.

If we want to address the real issue, then the concessions should be entitlement reform, not a Constitutional amendment that may or may not get ratified by states still looking for federal handouts. Passing a debt-ceiling hike on the promise of a balanced budget amendment is, well …

Update: One source on the Hill tells me that the BBA would have a requirement of 2/3rds majority for tax increases, which would stop most from happening — but that doesn’t explain what will happen when mandatory spending creates deficits. Congress would have to rewrite entitlements on the spot, or raise taxes, to meet a constitutional requirement for balance. We’re still in the same spot, and entitlement reform addresses the actual issue.

Update: One more note on this. The specifics of the BBA proposal floating on the Hill caps federal spending at 18%. I doubt seriously that this will get a 2/3rds margin in either chamber of Congress, although it’s absolutely the right idea. But even with that, perhaps especially with that, we would still have to do entitlement reform first.

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How about something simple like a 3% cut in spending for next year which would be $100B.

This would be an east pitch for Republicans. No need to get into the wonky details of what gets cut. Just a nice easy simple, 3% cut across the board. Even the dumbest math challenged liberals can understand. And when Nancy Pelosi gives press conferences claiming a 3% cut in the department of energy will mean 10 million kids drop out of high school, people will laugh at her.

How about cutting all federal spending by 25% across the board for 6 months, then 35% for the next 5 years. Fedreal spending could be capped at a percentage of GDP. Have a garage sale and start paying off the debt. Then start gutting all these idiotic federal programs.

Rand Paul (R-KY) suggested that he might vote for an increase in the debt ceiling if it came attached to a balanced-budget amendment to the Constitution.

If the Republicans do this, they’ll be trading action for another piece of paper to ignore. They know better, just like the people knew better on Bush’s amnesty. That’s not to say they’ll come to their senses or anything.

It’d be just another law the Democrats would ignore. Here is Illinois it is a LAW that we have a balanced budget and guess what? The Democrats have not even bothered to submit and pass a budget for 2 years, now!

This isn’t a trap, it’s a scam. A budget is just that. It’s a ‘plan’ showing how much they plan to spend. Not only does that have no relation to what they actually spend, there are too many things, like FEMA, which aren’t even reflected in the budget.

Now, if there was a constitutional amendment that said: Outlays, actual expenditures, couldn’t exceed revenues in any year (or some 5 year baseline to account for emergencies and recessions, etc.) then we’d be talking. Narrowly define any exceptions, congressionally approved wars for instance, and then base tax code on some maximum of GDP with a not to exceed inflation (defined properly – hahahaha! good luck!) increase. That would be a start. That might be worth fighting for.

Now we’re living in fantasy land. Hooray!!

A ‘balanced budget amendment’ is just a bag of dust. It would also just be, as mentioned above, excuse to raise taxes, not cut spending.

Would a balanced-budget amendment even get the required 38 states to ratify it? I can easily imagine 13 blue states voting it down.

Fact is, Republicans are going to have to give in on the debt ceiling, and Democrats know it. If it is not raised, it will create a financial crisis of such proportions that 2008 will be considered the “good old days” when the economy was still working.

State legislators need to recall these errant, arrogant a-holes in Congress.
Oh wait-the 17th took all of that accountability away.
Too bad.
So sad.
And while we’re at it, let’s get rid of the 16th.
A lot of stupid crap happened in the early 20th century in regards to the Const.
It’s time to undo it.

This isn’t a trap, it’s a scam. A budget is just that. It’s a ‘plan’ showing how much they plan to spend. Not only does that have no relation to what they actually spend, there are too many things, like FEMA, which aren’t even reflected in the budget.

Now, if there was a constitutional amendment that said: Outlays, actual expenditures, couldn’t exceed revenues in any year (or some 5 year baseline to account for emergencies and recessions, etc.) then we’d be talking. Narrowly define any exceptions, congressionally approved wars for instance, and then base tax code on some maximum of GDP with a not to exceed inflation (defined properly – hahahaha! good luck!) increase. That would be a start. That might be worth fighting for.

Now we’re living in fantasy land. Hooray!!

A ‘balanced budget amendment’ is just a bag of dust. It would also just be, as mentioned above, excuse to raise taxes, not cut spending.

The balanced budget amendment is a total joke. Not only is it never going to happen, but if it did, how would it be enforced? Would the Supreme Court be telling the Congress to increase taxes or to cut something out of a spending bill?

No need to give up hope. When people see the end of life as we know it staring us in the face, we change.

elfman on April 20, 2011 at 1:51 PM

People are seeing it, my fear is that our leaders are not. I know I’ve changed a lot in the past few years. Become more involved, more informed, tried to get debt paid off, build up the pantry, learn to live off stuff we raise/grow etc.

I don’t like the idea of messing with the Constitution, rather see action and right now.

They are thinking too small. How about elimination of Dept’s of Education and Energy effective July 1, 2011? No RIF payments – just lay off all the employees and close them down. That’s about $100 billion/yr right there or enough to pay roughly 1/2 the interest on current debt.

Update: One source on the Hill tells me that the BBA would have a requirement of 2/3rds majority for tax increases,

The BBAs also have caps on federal spending as a percent of GDP, so this is the way to force entitlement reform. Ed, you will never get Congress to reform entitlements. They all are in fear for their jobs if they do. Passing a BBA is the only way to do it.

How about this? The Republicans pass a law that caps federal spending as a percentage of GDP, eliminates the EPA, DoEdu, funding to planned parenthood, PBS, and repeals obamacare. Once this is passed the Reps say, “you don’t pass this bill, the debt ceiling doesn’t get raised.”

Win-win. The donks refuse, then gov’t shutdown and we see what happens when we are forced to cut spending. The donks agree, spending gets cut even though there is a raise in the debt ceiling (making it meaningless in the short term and reparable in the long term).

If the purpose of entitlements (welfare, etc) are to keep people out of poverty and lift them out of it; for every new sign up, someone else must be removed from the roles. Welfare must prove it works, or else, why have it?

Er, why the interest in a balanced-budget amendment when merely refusing to increase the debt-limit forces the budget into balance? Isn’t that like “enabling the budget to go out of balance at the price of promising to get it in balance”?

This government is reminding me more and more of a college party boy that has spent 6 years drinking and goofing off, using up all the money that was put away for him, while wrecking cars, chasing tail and ditching class. Then, when he’s used up all the money, and he can’t get loan money (and his draft lottery number is 24), he goes back to his parents and says – “Please, this time I’ll really study and work hard and get my degree. Please, please, please!!”

It didn’t work for my brother, it shouldn’t work for these Washington jackasses. But unfortunately, they’ll vote to raise the ceiling.

Er, why the interest in a balanced-budget amendment when merely refusing to increase the debt-limit forces the budget into balance?

Except that’s not what will happen in the short run. The short term consequence is that the government will have bills coming due that it is already obligated by contract and by law to pay, but will have no money to do so, so it will have to default on its bills/payments. Defaulting will kill off the economy faster than ten Obamacares rolled together.

We don’t need a balanced-budget amendment. What we need are mandatory spending cuts that trigger any time a vote on the debt ceiling is called. That way raising the debt ceiling automatically gets more painful every time we do it.

If we’re not starting with a proposal to lower the debt ceiling by $50B/month for the next 20 years, we’re effectively selling today’s children into debt slavery.

At 2% (historically low) interest, the $14T debt demands $280B a year, or almost $1000 each from the 300M citizens of this country — every year of their lives, from birth to death. That’s $1000 in taxes that can’t go to highways and bridges, police or firemen, the military, teachers or parks, but must be paid nevertheless. It can’t provide any current benefit in the years paid — because it’s all going to interest for money already spent. It’s just a millstone around the neck for people trying to get by.

This is the same Obama who personally negotiated the last budget deal, persoanlly agreed to eliminate certain czars and once the legislation was passed personally reneged on the czar part of the of the deal with a signing statement. He cannot be trusted in any way, shape or form. Definitely a trap.

Oh, for pity’s sake. I don’t want to hear any more crap about a balanced budget Amendment. California is constitutionally required to balance its budget. If that doesn’t illustrate what a load such requirements are, nothing will.

I don’t like meaningless tweaks to the Constitution and I’m surprised Rand Paul would give voice to such. Or maybe I’m not.

The short term consequence is that the government will have bills coming due that it is already obligated by contract and by law to pay, but will have no money to do so, so it will have to default on its bills/payments. Defaulting will kill off the economy faster than ten Obamacares rolled together.

AngusMc on April 20, 2011 at 3:00 PM

The budget refers to planned outlays. The bills coming due are actual outlays, so it would not apply to those. The catch is to prevent Congress from circumventing the BBA while still meeting legal obligations.

People may support a BBA even though they do not support the individual steps needed to reach a balanced budget. Same thing with family planning. I’m against cutting out the stuff I want, but balancing the budget is provides the necessary discipline.

Am I the only one who bothered reading Rand Paul’s plan for erasing the deficit and beginning to pay down the debt in FIVE YEARS?

The suggestion that this is all he’s got up his sleeve is factually incorrect. Sad that his own party is doing to him what the Democrats did to Paul Ryan’s plan for healthcare reform during the ObamaCare debates.

Except that’s not what will happen in the short run. The short term consequence is that the government will have bills coming due that it is already obligated by contract and by law to pay, but will have no money to do so, so it will have to default on its bills/payments.

AngusMc on April 20, 2011 at 3:00 PM

It will certainly have to default on its payments or its more nebulous obligations. And it’ll have to prioritize right quick, as the deficit is so huge. But (a) what choice do we have?, and (b) the prioritization must be done, and things are getting progressively [pun intended] worse, so why not do it “right quick”?

To govern is to choose, and our government has been choosing to kick the can down the street instead of facing reality. Reality is that we’re burdening future generations with stupid petty useless hooey to the point where they won’t have the ability to live their own lives.

If the debt ceiling was lowered by $50B/month, the first and primary function of the Executive would be finding that much to cut without the whole thing going foom — which would be a far more useful thing to do than dream up utopian government control schemes.

The government needs to live within what it takes in per month and for $2 Trillion per year it should be able to do just fine with that. That means we don’t do deficit spending, which takes the US out of the bond market for new issues and allows people to see we are serious about paying off our debts. That will put certainty INTO the market, by removing us FROM it.

That will get you a balanced budget immediately as outgo must not exceed income.

Then tie the debt limit to the amount of current debt we owe, so that as the amount we owe goes down then we are not tempted back INTO deficit spending. That will put rock-solid certainty that we are serious about mending our ways and taking care of things at home. Once we start doing that the a BBA should be something to slowly grind through the enactment process by showing that we need better ways to cap spendthrifts from putting us forever in debt.

A balanced budget amendment would probably just be another constitutional item to be ignored or abused, like the commerce clause, the establishment clause, or the due process clause. As matters already stand, it seems the Americans will eventually balance their budget, unless they’re conquered first. It seems they’ll have to balance it, inasmuch as they will eventually exhaust their available means. Along the way, though, the system of continent-wide “social” “welfare” programs seems likely to be discredited, even if only for the length of one adult lifetime. For now, though, the Americans can’t live within their means for one or more of these reasons, at least: They seem to have no earthly idea what the limits of their means are, because their means have been greatly multiplied by prosperity, extended by elastic credit, and largely concentrated in the hands of the “federal” government. They also don’t seem even to want to live within their means; it seems they just want whatever it is they do want, and they think what they want is just, that it would be cruel to deny it to them.

Constitutional Amendments take years to pass, including ratification by 3/4 of State Legislatures, and those controlled by Democrats would never ratify it, because they depend on Federal handouts to balance state budgets. By the time a Constitutional Amendment passes, the USA will already be broke.

House Republicans need tie the raising of the debt ceiling to a maximum limit on FY 2012 spending. If the Ryan plan is supposed to save $6 trillion in 10 years, the House Republicans need to propose a maximum FY 2012 spending figure of, say, $500 billion below FY 2011 spending, take it or leave it, and only raise the debt limit enough to cover the FY 2012 deficit at these reduced levels (with no tax increases).

This would force Congress to re-vote on the debt ceiling NEXT YEAR, with Obama up for re-election, and place the issue squarely on his shoulders.

We keep hearing about the debt ceiling and the need to raise it, but does anyone know the amount the President and Congress intends to raise it? If we raise it $2T we’ll face this same issue in 18 months, about the same time it took Obama to plow through the $2.2T increase in November 2009 and February 2010.